McCain's Image As Reformer Takes a Hit

Thursday 25 September 2008

by: Stephen Braun, The Los Angeles Times

Washington - Charges about the pervasive influence of lobbyists have been constant refrains in the 2008 race, but new reports that a company owned by John McCain's campaign manager received a $15,000 monthly stipend from a major mortgage firm at the center of the credit crisis are clouding the Arizona senator's effort to portray himself as a Wall Street reformer.

Even as McCain suspended his campaign Wednesday and sought to show leadership by returning to Washington to join negotiations over the stalled bank bailout plan, his operatives sparred with the Obama camp over the role that McCain campaign manager Rick Davis may have played in helping troubled home loan behemoth Freddie Mac.

Along with the crumbling finances of Wall Street investment houses and Fannie Mae, another teetering government-backed home loan provider, Freddie Mac's mortgage woes helped stoke the credit meltdown in the financial markets.

The sniping between the two campaigns followed reports this week in the New York Times and Newsweek that Davis Manafort, a public affairs firm owned by Davis, was paid $15,000 a month from 2005 through last month under a retainer he had arranged with officials at Freddie Mac.

The possibility that Freddie Mac paid Davis while he shaped McCain's campaign for the presidency has alarmed several nonpartisan groups backing lobbying reform -- and raised concerns about the substance behind McCain's long-cultivated image as the scourge of the lobbying community.

"This is a sticky wicket for McCain," said Sheila Krumholz, executive director for the Center for Responsive Politics. "This is a key advisor and manager of his campaign and, from what we're hearing, possibly a hired gun for Freddie Mac and Fannie Mae for years."

Mary Boyle, spokeswoman for Common Cause, cautioned that both campaigns "cater to special interests through their relationships with lobbyists and influence peddlers." But she added that "it certainly jumps out when you have a candidate like Sen. McCain, who has made his name as a reformer, dealing with these sorts of problems. He says he's fighting lobbyists and special interests, but we'd hope he'd have higher standards than what we're hearing about."

The McCain campaign trained most of its fire Wednesday on the New York Times, accusing it of being a "partisan paper of record." The campaign said that the Times report was "demonstrably false" and that Davis "has seen no income from Davis Manafort since 2006. Zero."

The attack on the Times followed a similarly blistering riposte from day-to-day operations manager Steve Schmidt, who complained after an earlier report on Davis' work for mortgage firms that the Times was "totally, 150% in the tank" for Obama. The Times had reported earlier in the week that Davis made $2 million between 2000 and 2005 as head of an advocacy coalition that represented both home loan giants.

After disbanding that effort, according to both the Times and Newsweek, Davis' firm began receiving $15,000 a month from Freddie Mac under an arrangement approved by Hollis McLoughlin, Freddie Mac's senior vice president for external relations and a former top Treasury official in the first Bush administration. Freddie Mac spokeswoman Sharon McHale said Wednesday that McLoughlin would not comment on the reports.

Davis had been scheduled to attend a lunch with reporters Wednesday sponsored by the Christian Science Monitor but suddenly canceled his appearance. McCain's political director, Mike DuHaime, who appeared in Davis' place, said the sudden switch had nothing to do with the lobbying reports. "Rick's company -- that he has been on leave from since 2006 -- certainly has had no effect on what Sen. McCain has said or done," DuHaime said.

The Obama campaign leaped quickly on the Davis reports. Obama alluded to McCain's troubles during his speech on the economy Wednesday in Dunedin, Fla.

"He talks about getting tough on Wall Street now, but he's been against the common-sense rules and regulations that could've stopped this mess for decades," Obama said, adding: "He says he'll take on the corporate lobbyists, but he put seven of the biggest lobbyists in Washington in charge of his campaign."

Dan Pfeiffer, communications director for Obama-Biden, said Davis and McCain "did not tell the truth about Davis' continuing financial relationship with Freddie Mac, one of the actors at the center of this financial crisis."

Arguing that Davis "apparently was being paid simply to provide access to the McCain campaign," Pfeiffer questioned whether Freddie Mac "or any other special interests buy access to John McCain by compensating top officials, including Rick Davis."

One former Fannie Mae executive downplayed the McCain connection in the decision to retain Davis' firm. "Rick's broader experience as a GOP operative is what drew people to hire him," said William R. Maloni, Fannie Mae's former chief lobbyist and a Democrat. McCain wasn't on the banking committee and wasn't particularly influential on such issues, he noted. "The McCain relationship was icing on the cake."

Still, it is an uncomfortable line of inquiry for the McCain campaign. Just last week, the McCain team ran a television ad alleging that Obama had relied on behind-the-scenes advice from Franklin D. Raines, the former chief executive of Fannie Mae, who was criticized for his lax stewardship of the firm. Obama aides responded that Raines was not an official advisor, although Raines had acknowledged in one media report that he had taken calls from Obama officials.

The McCain camp has also repeatedly tweaked Obama for taking more than $126,000 from employees of both Fannie Mae and Freddie Mac, while McCain took only $22,000.

And the McCain campaign has repeatedly lambasted Obama for briefly hiring former Fannie Mae Chief Executive James A. Johnson to head his vice presidential search. Johnson dropped his campaign role after reports surfaced that he had received a reduced-rate home mortgage from Countrywide Financial Corp., another failed mortgage firm.

"I would view donors as one step removed from someone who is a key advisor in the campaign," said Krumholz of the Center for Responsive Politics. "But there's mud flung on both doorsteps. The candidates are judged by the company they keep."